PENSION savers are failing to shop around for cheaper deals despite being hit by high exit charges when they take their money out of their pot, research has found.

As many as 70 per cent of people who want to access their cash under new pension freedoms are seeing an average of 10 per cent of its value taken being deducted in fees by pension scheme managers.

Fears that switching provider may incur larger charges than staying put appear to be putting many people off shopping around – with one in six savers stuck with their original provider because they did not want to be hit by exit charges, according to Citizens Advice.

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The charity estimates that 160,000 people have paid to access their pensions since the rules were changed in April last year with 41 per cent paying at least one type of charge.

More and more consumers are choosing drawdown products

Gillian Guy, chief executive of Citizens Advice,

Those facing fees reported an average cost of £1,577 in total but savers with smaller pots of £20,000 or less facing even higher fees of £1,966. Paul Wilcox, retirement planning specialist at The WAY Group, said: “It’s critical to shop around for the lowest charging options when it comes to pensions as there could be significant sums involved.

“Pensions freedoms have been a fabulous opportunity for millions of people, but careful financial planning for one’s retirement future should always be at the forefront of one’s long term strategy"

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As many as 70 per cent of people want to access their cash under new pension freedoms

Citizens Advice surveyed more than 500 people who had accessed their pension since the launch of the freedoms – which give over- 55s more flexibility over how they access their cash rather than being required to buy a guaranteed income called an annuity.

Although the Financial Conduct Authority recently set out plans to clamp down on early exit charges by capping exit charges at one per cent of the value of the pot, Citizens Advice believes this is still too high and wants a standard £50 exit charge to cover administrative costs put in place.

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An estimated 160,000 people have paid to access their pensions

Gillian Guy, chief executive of Citizens Advice, which helps deliver the Government-backed Pension Wise guidance for people using the retirement freedoms, said: “Picking a pension product is one of the biggest financial decisions people will ever make, so it’s worrying that so many aren’t shopping around.

“More and more consumers are choosing drawdown products but our research shows they aren’t checking whether they’re getting the best deal.

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The cost of fees was reported as £1,577 on average

“The Government and industry needs to work together to make it easier for consumers to compare drawdown products and choose the one which best meets their needs.

“The threat of excessive charges can also put people off making the right pension choices for them.”